Time to stop using flawed inflation measure for uprating, says RSS

The RSS is stepping up pressure on government to change the way in which it decides on certain price rises every year.

A letter (PDF) has been sent to the Chancellor of the Exchequer Philip Hammond, ahead of next week’s budget, expressing our concern over the use of the Retail Prices Index (RPI) to set some price rises but the use of the Consumer Prices Index (CPI) to uprate state pensions and benefits.

RSS executive director Hetan Shah said: ‘These indices seem to be used very selectively indeed. All too often, government formulae which affect people’s incomes (in the form of pensions and benefit increases) use the CPI, which normally provides a lower estimate of inflation. On the other hand, many key formulae which affect people’s outgoings (from student loan repayments to the cap on rail fares) are related to the RPI, which generally gives a higher estimate.’

Hetan called the current state of affairs ‘not only unfair but unjustifiable’, particularly as given that the RPI was stripped of its status of National Statistic nearly five years ago.

We have also expressed our concern in two newspapers. Hetan's recently published letter to The Telegraph called the practice of using RPI to set train fares, for example, as ‘is nothing short of scandalous.’

We also had a letter published inThe Times, urging the government to scrap the use of RPI in setting air travel taxation. ‘One of the reasons why air passenger duty has become sky-high is because of its link to the RPI’, it says. ‘It is surely time for the Chancellor to announce, in the Budget, a timetable for ending [RPI’s] inappropriate use in the interests of statistical integrity.’

The RSS has also supported, in many other representations, the case for ONS’s preferred Index of Consumer Prices, CPIH, to be accompanied crucially by the development of a new Household Costs Index or HCI, saying that despite its merits as a macroeconomic index, the CPIH will fail to account properly for households’ experiences of inflation.